Thursday, November 4, 2010

Dow jumps 219 as gold surges to a new record

Stocks were higher out of the gate. The thinking is if the Federal Reserve is buying, I might as well buy (just about anything).  Dow surged 219 to its highest level in over 2 years, advancers over decliners almost 5-1 & NAZ rose 37.  Bank stocks were strong giving the Financial Index a gain over 5, spelling a very big day.


Value205.06One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  6.78   (3.4%)

The MLP index rose 2¼ to the 357s setting another record while the REIT index surged 5½ to the 228s (2 year high).  Junk bond funds gained following the lead of Treasuries.  Treasuries had an outstanding day on the news that the Federal Reserve will be buying bonds.  The yields on the 2 & 5 year Treasuries are at RECORD LOWS & the 10 year Treasury bond yield fell an amazing 14 basis points to only 2.48%, close to its all-time record low (above 2% reached early last year)!

Treasury Yields:

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index   ---   2 months

Dow Jones REIT Index   ---   2 months

10 Year Treasury Yield Index   ---   2 months

Oil rose sharply in sympathy with gains in the stock markets.  Gold had a phenomenal day, one of its best in history, as it closes in on 1400!

CLZ10.NYM...Crude Oil Dec 10...86.63......Up 1.94  (2.4%)

GCX10.CMX...Gold Nov 10.....1,382.90 ...Up 45.80 (3.4%)

** Gold Super Cycle **  

The International Council of Shopping Centers index measuring revenue at stores open at least a year showed a 1.6% increase in Oct, the weakest performance since the 0.8% increase in Apr. This figure represented a slowdown from Sep, when it rose 2.6%.  Bright spots among retailers reporting revenue figures were Costco (COST) & Limited Brands (LTD), both of which reported bigger increases than expected.  Stores were forced to discount more on coats & hats to get shoppers to spend. Even as the weather cools, discounts will be necessary to keep pulling in shoppers amid high unemployment.  For retailers, the good news is that heavy discounting may not hurt Q3 profits because Oct is the least important month for the period,.

Heavy discounts fuel only modest retail gains- AP

Citigroup (C) remains the forgotten giant financial institution. But it has been rebounding modestly as the gov has been selling shares, indicating underlying strength which is stronger than shown in the charts.  Its bulls see it doubling from here assuming the economy does not have another major setback.  Today Citi rose 14¢ to 4.33.
To learn more about Citi

Citigroup   ---   2 months

Every market had its day in the sun as the Dow clearly blasted into new high territory.  Strength in the Treasury market can be accepted with this gain, but gold vaulting to new record highs can not.  Gold buying is from expectations that quantitative easing will lead to higher inflation.  That won't be seen in the short run, but it has become a major worry.  The rise in commodity prices suggest increased inflation rates may not be that far away.  Tomorrow is the big jobs report & nobody is expecting it to be pretty.  Instead it will be a grim reminder of economic reality in the US.  Overbought markets may not take the news well.

Dow Jones Industrials   ---   2 months

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